Ahead of the Open (VIP) -- August 13, 2013

August 13, 2013 03:13 AM

Corn futures are called to open 3 to 4 cents higher on light followthrough buying.

  • Corn futures ended the overnight session mostly 3 to 4 cents higher on followthrough from yesterday's gains.
  • Traders are still digesting yesterday's large, but still lower-than-expected corn crop estimate of 13.763 billion bushels.
  • Key this morning is if funds return as active buyers, especially since they hold a very large net short position.
  • Traders are also returning their focus to the weather, which is mixed. Normal precip is expected in the eastern Corn Belt, but below-normal precip over the western Belt in the NWS forecast for Aug. 18-22 raises concerns about worsening drought conditions.
  • Our weighted Crop Condition Index showed the corn crop declined by around 1 point last week to 366.03 (scale of 0 to 500 being perfect). Declines in Illinois, Iowa, Nebraska and the Dakotas outweighed gains in crop ratings for Indiana, Missouri and Ohio.


Soybean futures are called 7 to 9 cents higher on followthrough from overnight gains.

  • Soybean futures added to yesterday's strong gains by ending the overnight session mostly 7 to 9 cents higher, which was off session highs.
  • Traders still have USDA's lower-than-expected soybean crop estimate of 3.255 billion bu. on their minds, especially since USDA tightened 2013-14 carryover by 75 million bu. from last month to 220 million bushels.
  • A high-range close today would strongly suggest a near-term low has been posted in new-crop futures, as November beans have returned above the July low of $12.25.
  • Also supportive is the slight dip in our weighted Crop Condition Index, which showed the condition of the bean crop in Illinois, Iowa, North Dakota and South Dakota decline from week-ago.


All wheat flavors are called 2 to 4 cents higher on spillover from neighboring pits.

  • Wheat futures ended the overnight session 2 to 4 cents higher across all flavors.
  • Wheat is benefiting from spillover from neighboring pits and short-covering.
  • Yesterday's USDA report data is being viewed as neutral to friendly, but upside potential from the slight drop in domestic carryover is being limited by increased global competition.
  • FranceAgriMer increased its estimate of its wheat crop slightly to 36 MMT, which is up from 35.6 MMT last season.
  • While the condition of the spring wheat crop declined slightly last week, harvest has begun with 6% now cut. Traders expect harvest-related hedge pressure to build soon.


Live cattle futures are called to open higher on improvement in the beef market.

  • Live cattle futures are expected to build on yesterday's gains due to improvement in the boxed beef market and tightening market-ready supplies.
  • Choice beef values firmed $1.29 yesterday and Select rose 85 cents. Movement also improved to 182 loads.
  • Cash sources say packers could be forced to come to the cash market earlier in the week than usual given tighter market-ready supplies.
  • Meanwhile, a firmer tone in the corn market is expected to weigh on feeder cattle futures this morning, but losses should be limited to corrective trade due to strength in the cash market and tight calf supplies.


Lean hog futures are called to open mixed as traders reevaluate positions.

  • Lean hog futures posted strong gains yesterday and are vulnerable to profit-taking this morning.
  • Traders are concerned about a seasonal increase in pork supplies, although so far packer demand remains strong.
  • The cash hog market is called mostly steady this morning, but some plants are still in need of supplies for later in the week and are still working with profitable margins.
  • But yesterday's $1.16 drop in pork cutout values raises concerns about pork demand, especially since movement was light at 256.3 loads.
  • August lean hog futures ended yesterday at around a $1 discount to the cash index, which should limit pressure on nearby futures.
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